Funding is essential but often quite challenging part of the growth and development of any IT startup or SaaS startup. If you are thinking about starting a software as a service(SaaS)Business, the first thing you need to do is outlining all your needs. In this article, we are going to see in brief how to get funding for start-ups and the ways to get funds.
What Is A SaaS
Let’s begin by expanding what exactly a SaaS company is.SaaS( Software as a Service) means that users operate the software through their internet. The software developer hosts their software product on their own servers, which is the reason SaaS products are called “web-based solution” or “hosted solution.”
How To Get Funding For A Startup
There is no one-word answer to the above-mentioned question. Whether you should raise money or not based on what you have exactly at the moment. There are several types of funding for startups from where you can get money to run your business.
Types of funding for startups
When you think of bootstrap your business, you need to use your own money to run your business. This is more like building from scratch. Bootstrapping your business demands a lot of effort and hard work. You should have another source of income to cover up your cost of living. You can also use your savings to bootstrap your SaaS company, or you can even take a personal loan. When you bootstrap your business, you will be the sole owner of your company. But, seeing results in return take too much time. If you’re expecting good revenue and growth rate quickly, then bootstrapping is not a good option.
Grants From The Government:
You can join the hands of the government to run your business. The main advantage of government grants is that you are under no obligation to pay them back. Getting a grant from the government is a complex task because it demands a lot of paper works, and also companies in specific industries meeting some criteria are allowed to apply. There are still a lot of big companies that use government funds to run thier business successfully. You can also enjoy some additional benefits when you obtain funds from governments.
It is the best option for startups having a strong project plan. Most of the investors in the pool would mostly be SaaS founders themselves, who have exited their startup. This way, you can easily find like-minded people who are interested in your start-up.
Arranging funds for your start-up is not an easy process. The best way to get funds is to get funds from contests. You can find contests everywhere. The prize money may not be big, but it could help your SaaS startup needs. Participating in a contest means you need to abide by the rules of the conducting party. Entry conditions may vary based on their requirement and needs.
It is the best way to get your SaaS-initiative funded. They can hand you a lot of money and experience. When you enter an accelerator, You are getting into a mentorship program that lasts for months. Normally, startups join the accelerator before they have a marketable product. When you go for Accelerators, you are guided by experienced mentors, so you can have a lot of skills and product knowledge. You can also get operational support from the team and it is the best way to track your SaaS-startup.
It is an efficient way to arrange funds. Some crowdfunding platforms provide investors the chance to buy shares. In crowdfunding, anyone can invest an amount in your SaaS company. In this type of funding, the end-user supports you financially in return for your product or company. It is the best marketing tool to generate public interest in your product. You can easily find investors who are interested in buying your products before it is even ready.
It is the popular method introduced in Japanese, where entrepreneurs present their ideas to a panel of investors. Then the judges ask questions regarding their ideas, if the investor likes your idea, they will invest in your SaaS startup. Normally angel investors are those who have a lot of money, but quite often, they are rich entrepreneurs who are looking for the opportunity to boost their capital.
It is the professional form of arranging finance for SaaS-startups. About 90 percent of the venture capitalists focus their attention on a particular sector or geographical region. The trick to turning venture capitalists into your project is to provide them with a solid plan. Your project plan should convince your venture capitalist. You can convince them by showing your Minimum Viable Product. Getting help from a venture capitalist can be difficult, but in return, you have a large capital injection, professional advice, operational support, and more.
Initial Public Offering(IPO):
It is the last stage of funding any startup. Normally, an IPO is a method used by business owners who loses hope in the above-mentioned funding process. Initial Public Offering is when corporates shares in the start-up get offered to the public for the first time. The company’s owners and investors receive profit based on their present stake in the firm.
Revenue Based Financing:
It is a method where an investor spends capital into your business in exchange for a percentage of ongoing gross revenues with a monthly markup. In this way, you are not giving away any equity and after you complete the loan, the company stays in your hands.
The ten sources for your SaaS startup funding discussed each has its unique characteristics. Some may fit for a small investment, whereas others can fail if the need exceeds a certain limit. From the above-mentioned types of funding for startups, you can choose the best one based on your needs and budget. Invest your energy and time to find out which is the best way to fund your IT start-up. It might be a great business decision you will ever make.